Food maker General Mills, Inc. (GIS) is scheduled to release its fiscal 2024 second quarter financial results on December 20. Wall Street anticipates the company to post earnings per share of $1.16, up 5.3% from last year's quarter. Meanwhile, GIS is expected to generate $5.36 billion in revenue, a 2.6% year-over-year rise.
In the first quarter, GIS demonstrated growth on both the top and bottom lines, navigating an evolving external environment characterized by moderating inflation, stabilized supply chains, and a resilient yet cautious consumer.
As GIS looks ahead, the company maintains a steadfast focus on executing its Accelerate strategy to drive robust growth for its portfolio of brands. Confident in its plans and adaptive capabilities in response to ongoing shifts in the consumer landscape, GIS has reaffirmed its guidance for fiscal 2024.
The company anticipates organic net sales to increase by 3% to 4%, reflecting its commitment to meet evolving market demands. Furthermore, it projects a 4% to 6% increase in both adjusted operating profit and adjusted diluted EPS in constant currency, underscoring its financial resilience and strategic execution.
Moreover, on December 5, it was reported that GIS had introduced new cereal options across six popular brands, targeting consumers who increasingly snack on cereal. By refreshing its portfolio with updated versions of household favorites, GIS aims to tap into the snacking category's growth potential, leveraging the strength of its established brands.
Additionally, on November 9, GIS announced its acquisition of Fera Pets, Inc., a pet supplement company founded by veterinarians. Diversification is poised to bolster GIS' growth by tapping into the thriving pet care market and meeting the increasing demand for health-conscious pet products.
Also, the acquisition aligns with evolving consumer preferences, positioning GIS for expansion and success in the dynamic pet industry.
Shares of GIS have gained 3.7% over the past month to close the last trading session at $66.34.
Here are the financial aspects of GIS that could influence its performance in the near term:
Mixed Financials
For the fiscal 2024 first quarter that ended August 27, 2023, GIS’ net sales increased 4% year-over-year to $4.90 billion. Its adjusted gross margin grew 5.5% from the year-ago value to $1.74 billion. Also, its adjusted operating profit rose 2% from the prior year’s period to $899 million.
However, adjusted net earnings attributable to GIS declined 3.5% year-over-year to $647 million, while adjusted EPS decreased 1.8% from the year-ago value to $1.09.
Mixed Growth Record
Over the past three years, GIS’ revenue and net income increased at a CAGR of 4.1% and 2.10%, respectively. In addition, its EPS grew at a CAGR of 3.1%. However, the company’s levered free cash flow declined at a CAGR of 19% over the same time frame.
Positive Analyst Estimates
The consensus revenue estimate of $20.58 billion for the fiscal year ending May 2024 reflects a 2.4% year-over-year improvement. Likewise, the company’s EPS for the ongoing year is estimated to come in at $4.47, up 4% from the prior year. Furthermore, GIS topped the consensus EPS estimates in all four trailing quarters.
Mixed Valuation
In terms of forward non-GAAP P/E, GIS is trading at 14.59x, 17.5% lower than the industry average of 17.69x. Its forward Price/Cash Flow of 11.20x is 16% lower than the 13.32x industry average. However, GIS’ forward EV/EBITDA of 11.86x is 6.5% higher than the 11.14x industry average.
Higher-Than-Industry Profitability
The stock’s trailing-12-month EBITDA margin of 19.56% is 73.7% higher than the industry average of 11.26%. Its trailing-12-month net income margin of 12.07% is 146.5% higher than the 4.90% industry average. Moreover, the stock’s trailing-12-month levered FCF margin of 7.48% compare with the industry average of 4.86%.
POWR Ratings Exhibit Strong Prospects
GIS’ outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GIS has a B grade for Quality, which is in sync with its robust profitability. In addition, the stock has a C grade for Value, consistent with its mixed valuation.
GIS is ranked #38 in the 78-stock Food Makers industry. Click here to access GIS’ Growth, Momentum, Stability, and Sentiment ratings.
Bottom Line
GIS is strategically positioned for robust growth with its innovative Accelerate strategy at the forefront. Furthermore, the company's forward-thinking approach is evident in its commitment to product innovation and its recent foray into the dynamic pet care market through a strategic acquisition.
While the long-term outlook for GIS appears promising, it seems prudent to acknowledge the mixed financial performance in the latest quarter and mixed growth history. As a result, it could be wise to monitor the stock closely for now and wait for a better entry point.
How Does General Mills, Inc. (GIS) Stack Up Against Its Peers?
While GIS has an overall grade of C, equating to a Neutral rating, you may check out these other A (Strong Buy) and B (Buy) stocks within the Food Makers industry: Sysco Corporation (SYY), Ingredion Incorporated (INGR) and Lifeway Foods, Inc. (LWAY). To explore more Food Makers stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GIS shares were trading at $66.38 per share on Tuesday morning, up $0.04 (+0.06%). Year-to-date, GIS has declined -18.44%, versus a 25.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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